A key difference between a quota and a tariff is that
A) a quota has a larger effect on quantity than on price.
B) the government of the importing country gains revenue from a tariff, but the price gap caused by a quota benefits domestic importers.
C) a tariff has a larger effect on quantity than on price.
D) All of the above answers are correct.

Question

Quizplus · Accepted Answer

Quota and tariff are both protectionist measures used by governments to restrict imports. However, the key difference is that a quota directly limits the quantity of a good that can be imported, while a tariff is a tax placed on imported goods, which increases their price. As a result, a quota benefits domestic importers who can charge higher prices due to the limited supply, while a tariff generates revenue for the government. Although both measures can affect the quantity and price of imports, the primary difference lies in their objective and impact on different stakeholders. Choice A and C are incorrect because they propose opposite statements that are not necessarily true. Choice D is incorrect because only B provides an accurate explanation.

A Key Difference Between a Quota and a Tariff Is